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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Note 2. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers and vehicles and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. Certain real estate leases include one or more options to extend the lease term or options to purchase the leased property at the Company's sole discretion. When deemed reasonably certain of exercise, the renewal and purchase options are included in the determination of the lease term and lease payment obligation, respectively. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Right-of-use ("ROU") assets represent the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the rate implicit in the lease agreement in determining the present value of minimum lease payments. If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. At the commencement of a lease, the ROU asset for operating leases is measured by taking the sum of the present value of the lease liability, initial direct costs (if any) and prepaid lease payments (if any), and deducting lease incentives (if any). After the lease commencement date and over the lease term, lease expense is recognized as a single lease cost on a straight-line basis. Lease agreements related to properties are generally comprised of lease components and non-lease components. Non-lease components, such as common area maintenance charges, are expensed as incurred and recognized separately from the straight-line lease expense. Variable lease payments that do not depend on an index or rate, such as rental payments based on a percentage of retail sales over contractual levels, are expensed separately as incurred, and are not included in the measurement of the ROU asset and lease liability. Variable lease payments that depend on an index or rate, such as payments that are adjusted periodically for inflation, are included in the measurement of the ROU asset and lease liability and are recognized on a straight-line basis over the lease term.

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatements on a few of its operating leases. The Company opted to not modify these leases in accordance with the FASB Staff Q&A-Topic 842 and Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Condensed Balance Sheet as of September 30, 2020, and rent abatements of $120,000 and $1,431,000, which were recorded as reductions in rent expense in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2020, respectively.

Supplemental balance sheet information related to leases is as follows (in thousands):

	Balance Sheet Location		September 30, 2020				December 31, 2019
Operating leases
ROU assets, net	Operating lease ROU assets, net		$	186,721			$	160,098
Lease liabilities, short-term	Operating lease liabilities, short-term		$	28,011			$	26,418
Lease liabilities, long-term	Operating lease liabilities, long-term		$	170,732			$	137,696
Finance Leases
ROU assets, net,	Other assets		$	930			$	1,263
Lease liabilities, short-term	Accounts payable and accrued expenses		$	271			$	589
Lease liabilities, long-term	Long-term other		$	493			$	558

The components of lease expense are as follows (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Operating lease costs	$	10,458			$	8,758			$	31,759			$	28,357
Financing lease costs:
Amortization of right-of-use assets	185				180				505				657
Interest on lease liabilities	9				14				31				69
Total financing lease costs	194				194				536				726
Variable lease costs	590				1,091				2,473				3,277
Total lease costs	$	11,242			$	10,043			$	34,768			$	32,360

Other information related to leases was as follows (in thousands):

		Nine Months Ended September 30,
Supplemental Cash Flows Information		2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	29,122			$	29,783
Operating cash flows from finance leases		$	31			$	69
Financing cash flows from finance leases		$	530			$	583
Lease liabilities arising from new ROU assets:
Operating leases		$	54,678			$	8,819
Finance leases		$	131			$	172

	September 30, 2020			December 31, 2019
Weighted average remaining lease term (years):
Operating leases	10.0			10.4
Finance leases	3.1			2.8
Weighted average discount rate:
Operating leases	5.4	%		5.7	%
Finance leases	3.5	%		4.2	%

Future minimum lease obligations as of September 30, 2020 were as follows (in thousands):

	Operating Leases				Finance Leases
Remainder of 2020	$	10,644			$	89
2021	36,073				274
2022	31,426				234
2023	27,259				124
2024	23,591				51
Thereafter	130,615				31
Total future lease payments	259,608				803
Less: imputed interest	60,865				39
Total	$	198,743			$	764

Leases

Note 2. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers and vehicles and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. Certain real estate leases include one or more options to extend the lease term or options to purchase the leased property at the Company's sole discretion. When deemed reasonably certain of exercise, the renewal and purchase options are included in the determination of the lease term and lease payment obligation, respectively. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Right-of-use ("ROU") assets represent the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the rate implicit in the lease agreement in determining the present value of minimum lease payments. If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. At the commencement of a lease, the ROU asset for operating leases is measured by taking the sum of the present value of the lease liability, initial direct costs (if any) and prepaid lease payments (if any), and deducting lease incentives (if any). After the lease commencement date and over the lease term, lease expense is recognized as a single lease cost on a straight-line basis. Lease agreements related to properties are generally comprised of lease components and non-lease components. Non-lease components, such as common area maintenance charges, are expensed as incurred and recognized separately from the straight-line lease expense. Variable lease payments that do not depend on an index or rate, such as rental payments based on a percentage of retail sales over contractual levels, are expensed separately as incurred, and are not included in the measurement of the ROU asset and lease liability. Variable lease payments that depend on an index or rate, such as payments that are adjusted periodically for inflation, are included in the measurement of the ROU asset and lease liability and are recognized on a straight-line basis over the lease term.

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatements on a few of its operating leases. The Company opted to not modify these leases in accordance with the FASB Staff Q&A-Topic 842 and Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Condensed Balance Sheet as of September 30, 2020, and rent abatements of $120,000 and $1,431,000, which were recorded as reductions in rent expense in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2020, respectively.

Supplemental balance sheet information related to leases is as follows (in thousands):

	Balance Sheet Location		September 30, 2020				December 31, 2019
Operating leases
ROU assets, net	Operating lease ROU assets, net		$	186,721			$	160,098
Lease liabilities, short-term	Operating lease liabilities, short-term		$	28,011			$	26,418
Lease liabilities, long-term	Operating lease liabilities, long-term		$	170,732			$	137,696
Finance Leases
ROU assets, net,	Other assets		$	930			$	1,263
Lease liabilities, short-term	Accounts payable and accrued expenses		$	271			$	589
Lease liabilities, long-term	Long-term other		$	493			$	558

The components of lease expense are as follows (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Operating lease costs	$	10,458			$	8,758			$	31,759			$	28,357
Financing lease costs:
Amortization of right-of-use assets	185				180				505				657
Interest on lease liabilities	9				14				31				69
Total financing lease costs	194				194				536				726
Variable lease costs	590				1,091				2,473				3,277
Total lease costs	$	11,242			$	10,043			$	34,768			$	32,360

Other information related to leases was as follows (in thousands):

		Nine Months Ended September 30,
Supplemental Cash Flows Information		2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	29,122			$	29,783
Operating cash flows from finance leases		$	31			$	69
Financing cash flows from finance leases		$	530			$	583
Lease liabilities arising from new ROU assets:
Operating leases		$	54,678			$	8,819
Finance leases		$	131			$	172

	September 30, 2020			December 31, 2019
Weighted average remaining lease term (years):
Operating leases	10.0			10.4
Finance leases	3.1			2.8
Weighted average discount rate:
Operating leases	5.4	%		5.7	%
Finance leases	3.5	%		4.2	%

Future minimum lease obligations as of September 30, 2020 were as follows (in thousands):

	Operating Leases				Finance Leases
Remainder of 2020	$	10,644			$	89
2021	36,073				274
2022	31,426				234
2023	27,259				124
2024	23,591				51
Thereafter	130,615				31
Total future lease payments	259,608				803
Less: imputed interest	60,865				39
Total	$	198,743			$	764

X

- References

No definition available.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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